ICRA estimates that average room rates (ARR) across the country would remain flat for 2015-16. However, a 6-7 per cent improvement in occupancy would support a 7 per cent growth in the revenue per available room (RevPAR).

Room inventory in the premium category is estimated to increase by 8 per cent for 2015-16 as compared to 4 per cent in 2014-15. With deferment in construction, supply addition would be lower than earlier estimates at 7.7-8 per cent for 2016-17.

Foreign tourist arrivals (FTAs) slowed down to 4.4 per cent in the calendar year 2015 (7.1 per cent in 2014). The FTA segment continued to remain far below its true potential, the study said.

Further, the per capita dollar spend by tourists declined sharply in 2015 after remaining stagnant for three years.

Given the muted global economic outlook, FTA growth for CY2016 is also expected to be subdued. Domestic travel, going by the domestic airline revenue passenger kilometre (RPKM) trends, exhibited strong growth during the past 12 months, indicating improving consumer confidence.

ICRA estimates top line growth for the industry to be ~8 per cent in 2015-16, with operating margins expanding by 100–150 bps. Growth would improve in 2016-17 to 9-10 per cent, aided by a pick-up in occupancies and ARR traction in a few markets such as Mumbai.

While improving consumer confidence has supported growth in occupancies, ARRs also appear to have bottomed out and were marginally down during YTD Dec-2015. Revenues for the industry sample grew by 7 per cent in Q2, 2015-16, due mainly to occupancy driven RevPAR growth, while cost control measures bumped up operating margin by 250 bps to 8.8 per cent.

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